More involvement at all levels and a greater emphasis on planning and admin – those are among the trends currently being seen in the employee equity compensation plan space for executives.
That’s according to experienced industry professional Ryan Shreero, Executive Services, J.P. Morgan Workplace Solutions, who was part of our recent wide-ranging webinar on where the industry is now and what’s likely to come next in the world of employee equity compensation.
Taking the recently published J.P. Morgan Workplace Solutions’ Trends In Equity Compensation: 2024 Report as a launching point, the panel discussion touched on many talking points arising from the survey’s findings and related them to the wider scene.
One of the points emphasized by Ryan was that the current direction within equity compensation is very much to broaden the net, bringing the opportunity for share ownership to employees at all levels.
“We’re really seeing more of everything and that means more equity-based compensation from rank and file all the way up through the C-Suite,” he said.
Ryan stressed that this represents somewhat of a departure on how many companies previously tended to design their equity compensation strategy.
“A lot of these plans were originally designed for C-Suite individuals, but we’re seeing more and more that companies are applying equity comp programs across all different employee levels,” he said.
Along with this, Ryan also sees companies becoming more flexible in terms of the specific types of equity they offer to their people.
“There are a lot more choices available right now. We have what are called ‘cafeteria plans’, whereby mostly officers but also a lot of other employees will have the ability to choose what kind of equity comp they want, whether it’s performance units or restricted stock units or just the traditional stock options,” he said.
However, Ryan added that this broadening has been accompanied by regulatory changes that individuals and companies must pay heed to.
“We’re now seeing much more complexity from the regulators when it comes to equity compensation. We saw a big change a little over a year ago when they changed the cooling off periods for trading plans, extending those from just a few days to 30 days and then to 90 days. We’re also seeing trade parameters being scrutinized when it comes to single trade plans, as opposed to multi-faceted plans that extend over different time periods,” he said.
More specifically, Ryan pointed out that recent Securities and Exchange Commission (SEC) and other regulatory changes have impacted the design and use of 10b5-1 plans.
“The original three key details in any trading plan for an employee would be date, amount and price. Now, you’ve got to go way beyond that. And you’ve got to think about Rule 10b5-1, and putting plans in place that really consider grants, the vesting schedules that they have, the tax lots that they’re tackling, the different holding periods, whether you’re putting in a trade during an open window period. And if you are building a 10b5-1 plan, is that a single trade plan, of which you’re only allowed one per year, or is it across different time periods within the plan?” he said.
He also made a point of stating that companies facing these issues and other equity comp-related concerns would be well advised to reach out to an external partner with experience in the field.
“These are all things you can navigate your way through if you work with a company that helps with advice and education,” he said.
What next?
Workplace Solutions provide businesses of all sizes with an all-in-one equity compensation management solution. We handle all equity award administration so you have more time to focus on your company’s journey. Get in touch today to find out how we can assist you.
You can access the on-demand webinar here.
This publication contains general information only and J.P. Morgan Workplace Solutions is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. J.P. Morgan Workplace Solutions’ Insights is not a substitute for professional advice and should not be used as such. J.P. Morgan Workplace Solutions does not assume any liability for reliance on the information provided herein.
